March 2023 Budget

Although the tone of the Chancellor was very upbeat, the reality of the budget was clearly “steady as we go” against the backdrop of financial market jitters, the continuing conflict in Ukraine and a looming election.  Critic or supporter – perhaps that very much depends on the extent to which the (lengthy) budget represents a return to sensible policy?  

The majority of the key tax-raising measures announced by the Chancellor in his Autumn Statement also take effect from April 2023. The main revenue raising strategy is to freeze various tax allowances, including the Income Tax Personal Allowance and the VAT threshold. With inflation climbing to over 10%, the government receives its own windfall in terms of VAT receipts. The decision to reduce the additional (upper) rate threshold next year means that more taxpayers will pay tax at the 45% rate, thus spreading some of the tax burden, as anticipated, to higher earners.

Looking at the position of the ‘private client’ there is some bad news in the form of a reduction in the tax-free allowances for both Dividend Tax and Capital Gains Tax (CGT) over the next two years. The Chancellor has also extended the scope of a windfall tax on the energy sector. There are always winners and losers, and online businesses might breathe a sigh of relief that the government has decided not to introduce an online sales tax. Meanwhile, reforming measures for business rates continue to evolve, with a new form of small business rate relief planned to protect certain businesses from the large increase to bills that may well occur thanks to the update in rateable values of all non-domestic properties in England to reflect their value as at 1 April 2021.

Combined with the many mini-budgets and statements made towards the end of 2022, this Budget brings change; good, bad, and often to be determined with time. What is clear is that 2023 remains a year of opportunity and we are here to work alongside you and help you grow

What about the cost of living?

Energy Costs

The Energy Price Guarantee (EPG) brings a typical household energy bill in Great Britain down to around £2,500 per year. It has now been announced that the £2,500 EPG will be extended by 3 months to 30th June 2023, before increasing to £3,000 until the end of the EPG period on 31 March 2024. This extra 3 months at £2,500 will be worth £160 for a typical household.

A new scheme for businesses, charities and the public sector has been confirmed. The Business Energy Bills Discount Scheme will run until 31 March 2024, giving non-domestic customers discounts on their gas and electricity bills.


Additional support is being provided towards childcare costs in what the government describes as a ‘childcare revolution’. This includes 30 hours of free childcare for every child over the age of 9 months, with support being phased in until every eligible working parent of under 5s gets this support by September 2025.

For Universal Credit claimants, the government will also pay childcare costs in advance rather than arrears, when parents move into work or increase their hours. The maximum they can claim will also be boosted to £951 for one child and £1,630 for two children, an increase of around 50%.

Benefits and State Pension

As confirmed at Autumn Statement 2022, the government will also increase benefits, including the State Pension, paid to recipients in the tax year to 5 April 2024, by 10.1%. 

This increase in the State Pension means that most pensioners will receive £10,600 in 2023/24, where they have 35 qualifying years. We urge you again to check your contribution record on your Government Gateway account and consider making Class 3 voluntary National Insurance (NI) contributions in respect of missing qualifying years. Normally it is only possible to make voluntary NI contributions for the past 6 tax years, but until 31 July 2023, it is possible to go back as far as 6 April 2006 and pay additional contributions at the 2022/23 Class 3 rate of £15.85 per week. 

In-year Class 3 contributions for 2023/24 will increase to £17.45 per week.

Duties on fuel frozen

The proposed 11p rise in fuel duty will be cancelled thus maintaining last year’s 5p cut for another 12-months.

Draught Relief

Draught Relief has also been significantly extended from 5% to 9.2%, so that the duty on an average draught pint of beer served in a pub, from 1 August 2023, will be up to 11 pence lower than the duty in supermarkets. The commitment to duty on a pub pint being lower than the supermarket has been termed the “Brexit Pubs Guarantee” by the Chancellor, and this change will also be enjoyed by every pub in Northern Ireland thanks to the Windsor Framework.

What about income tax?

It’s not so much that taxes are increasing but rather than more is being taxed

Increasing Liabilities

The personal allowance and basic rate band threshold are now frozen in place until 5 April 2028. As earnings increase, individuals will move into higher tax bands. This is often referred to as ‘fiscal drag’ because it will raise more tax without the government increasing income tax rates.

The personal allowance continues to be partially and then fully withdrawn for higher earners, with £1 of personal allowance lost for every £2 of adjusted net income over £100,000. 

Other Allowances 

Savings income continues to benefit from a personal savings allowance of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Dividend income attracts a £1,000 dividend allowance in 2023/24, down from the £2,000 allowance seen in previous years. These allowances are in addition to the personal allowance and attract a 0% rate of income tax. 

For those living in Scotland and classed as Scottish taxpayers have a slightly different banding system for ‘other income’ (non-savings, non-dividend) as follows: 

The application of income tax to savings and dividends income is the same as for the rest of the UK.

Pension Tax Relief

There was good news in the Budget for those saving in a personal pension. The current pension lifetime allowance (LTA) charge is being abolished from 6 April 2023, although the actual change to the Lifetime allowance doesn’t take effect until April 2024.   

Individuals may be able to receive 25% of their pension savings as a tax-free lump sum when they become entitled to their pension benefits. This is currently capped at 25% of the LTA and going forwards, for most individuals, will remain capped at £268,275, despite the planned change in the level of the Lifetime Allowance.

The pension Annual Allowance (AA) increases from £40,000 to £60,000 from 6 April 2023. The AA applies to the combined pension input by the individual and, in the case of employees, their employer. Pension contributions in excess of the AA result in a tax charge on the individual, although they may take advantage of unused AA amounts from the 3 previous tax years. 

For those with high incomes, the AA is tapered. From 6 April 2023, where a taxpayer’s adjusted income exceeds £260,000 (increasing from £240,000), the AA is tapered by £1 for every £2 in excess of £260,000, down to a minimum of £10,000 (increasing from £4,000).

The Money Purchase Annual Allowance (MPAA) replaces the AA when an individual starts to flexibly access a defined contribution pension scheme. The MPAA will increase from £4,000 to £10,000 on 6 April 2023. 

Tax Efficient Savings

There were no changes to the annual limits for Individual Savings Accounts (ISAs), Child Trust Funds or the Junior ISA. These limits remain at £20,000, £9,000 and £9,000 respectively.

What about other taxes?

Capital Gains Tax

In the Autumn Statement, the Chancellor announced that the £12,300 annual tax-free capital gains tax exemption (or allowance) will be reduced to just £6,000 in 2023/24 and only £3,000 in 2024/25.

This change will mean that those disposing of capital assets will pay more tax, where the new lower allowance is exceeded.

Couples who are in the process of separating, or who have commenced divorce proceedings, need to be aware of new rules taking effect from 6 April 2023 concerning the transfer of capital assets between them as a result of their separation.  

If you are planning any capital disposals, please contact us to discuss the best strategy for the disposal.

Inheritance Tax

In the 2023 Autumn Statement, the inheritance tax nil rate band was frozen at £325,000 until April 2028. The residence nil rate band will also remain at £175,000 and the residence nil rate band taper will continue to start at £2 million.


The VAT registration and deregistration thresholds continue to be frozen at £85,000 and £83,000 respectively, instead of increasing each year in line with inflation. This will remain the case until March 2026.

Since 1 January 2023, a new penalty regime has been in operation for late VAT return submission and late payment of VAT. The new system is designed to target more persistent offenders, with penalties escalating quickly where defaults reoccur.

Business Taxes

National Insurance Contributions (NIC) for the self-employed in 2023/24

Self-employed individuals are required to pay Class 2 and Class 4 NICs if their profits exceed £12,570. These NICs are usually collected with the individual’s income tax self-assessment payments.

For 2023/24, Class 2 NICs are calculated at £3.45 per week and Class 4 NICs are calculated at 9% on profits between £12,570 and £50,750, and at 2% on profits over £50,750.

Tax Relief for expenditure on plant and machinery

The Annual Investment Allowance (AIA), giving 100% tax relief to unincorporated businesses and companies investing in qualifying plant and machinery, is now permanently set at £1million.

The super-deduction, which gives enhanced 130% relief for new qualifying plant and machinery acquired by companies, will end on 31 March 2023. 

As a replacement for the super-deduction, ‘full expensing’ (effectively 100% tax relief, called a ‘First Year Allowance’ (FYA)) will be available to companies (not unincorporated businesses) incurring expenditure on new qualifying plant and machinery between 1 April 2023 and 31 March 2026. The qualifying criteria is quite broad although there are exclusions, including cars and features integral to a building (for example, heating systems). With regard to ‘integral features’, a smaller 50% FYA will be available. Subsequent disposals of assets on which one of these FYAs has been claimed will trigger a clawback of tax relief at a rate of 100% or 50% of the disposal proceeds, depending on the rate of the original relief. These new FYAs will mainly be of interest to companies that have already fully utilised their £1million AIA.

The separate 100% FYA for electric vehicle charge points remains available for unincorporated businesses and companies until Spring 2025.

This announcement will have very little impact on the majority of businesses and it should be remembered that these allowances do not increase the tax relief available but simply accelerates it – this is more about cashflow planning.

Corporate Taxes

New rates from 1 April 2023

From 1 April 2023, the rate of Corporation Tax will increase to 25% if a company’s profits exceed £250,000 a year. The current 19% rate will however continue to apply where profits are no more than £50,000 a year. 

Where a company’s profits fall between £50,000 and £250,000 a year, the profits are taxed at the higher 25% rate, but a ‘marginal relief’ is given to reduce the liability, with the effective rate being closer to 19% for those with profits just over £50,000. 

Companies in the same corporate group (or otherwise connected by association) must share the £50,000 and £250,000 thresholds between them, making the 25% rate more likely to apply.  We will discuss the implication of associated companies in a future newsletter.

Research & Development (R&D) Reliefs

From 1 April 2023 a raft of changes is coming to the R&D tax relief regime and claimant companies should consider obtaining updated advice if they’ve not already done so. The key changes are:

  • For SME companies, R&D tax relief rates will be reduced from 230% to 186%. 
  • For loss-making SME companies, the current payable credit of 14.5% will only be available for companies whose R&D expenditure constitutes at least 40% of their total expenditure. For R&D claimants that don’t meet the new 40% test, the payable credit will be reduced from 14.5% to 10% of the eligible loss.
  • Qualifying R&D expenditure will be expanded to include data licences and cloud computing services.
  • New claimants (those who have not made a claim in the previous 3 years) will be required to inform HMRC of their intention to make a R&D claim within 6 months of the end of the accounting period to which the claim relates. 

From 1 August 2023, additional information requirements will need to be fulfilled when making a R&D claim.

A £500 million per year package of support for 20,000 research and development (R&D) intensive businesses through changes to R&D tax credits was announced. In full, the Chancellor’s announced changes in this important area are:

  • The scheme is targeted specifically at loss making R&D intensive SMEs. Focusing support towards those most impacted by the rate changes introduced at Autumn Statement 2022.
  • A company is considered R&D intensive where its qualifying R&D expenditure is worth 40% or more of its total expenditure.
  • Eligible loss-making companies will be able to claim £27 from HMRC for every £100 of R&D investment, instead of £18.60 for non-R&D intensive loss makers.
  • Around 1,000 claiming companies will come from the pharmaceutical and life sciences industry. This will support the development of life saving medicines.
  • Around 4,000 digital SMEs will be from the computer programming, consultancy, and related activities sector. This will support the development of AI, machine learning and other digital based technologies.
  • Around 3,000 other manufacturing firms, and another 3,000 professional, scientific, and technical activities firms will also qualify for the enhanced support.
  • This builds on previously announced changes to support modern research methods by expanding the scope of qualifying expenditure for R&D reliefs to include data & cloud computing costs.

The permanent increase from 13% to 20% for the R&D Expenditure Credit rate announced at Autumn Statement 2022 also means the UK now has the joint highest uncapped headline rate of tax relief in the G7 for large companies

Creative industries tax reliefs

The government continues to support the creative industries by reforming and enhancing film, TV and video games tax reliefs. The government will also extend the temporary higher rates of theatre, orchestra, and museums and galleries tax reliefs for 2 further years until April 2025.

Employment Taxes

  • National Insurance Contributions (NICs)

Like the main income tax bandings, employer and employee NIC thresholds are now also frozen until 5 April 2028. This broadly means that employers’ NIC will continue to apply at 13.8% to earnings in excess of £9,100 a year (£175 per week) and employees will continue to pay 12% on earnings between £12,570 and £50,270 and 2% thereafter.

  • Company Cars and Other Benefits

Employees are required to pay income tax on certain non-cash benefits. For example, the provision of a company car constitutes a taxable ‘benefit in kind’. Employers also pay Class 1A NIC at 13.8% on the value of benefits.

The set percentages used to calculate company car benefits are fixed until 5 April 2025 before slight increases apply to most car types, including electronic and ultra-low emission, from 6 April 2025.

More imminently, the figures used to calculate benefits-in-kind on employer-provided vans, van fuel (for private journeys in company vans), and car fuel (for private journeys in company cars) will increase in line with the Consumer Price Index (CPI) from 6 April 2023. These will become:

  • Van benefit £3,960
  • Van fuel benefit £757
  • Car fuel benefit multiplier £27,800

Investment Zones

The Government will establish 12 ‘Investment Zones’ across the UK, including a promise to have at least one each in Scotland, Northern Ireland and Wales. 

Each successful zone will have access to £80m funding over 5 years and benefit from a package of tax reliefs. These include relief from Stamp Duty Land Tax (SDLT), enhanced capital allowances for plant and machinery, enhanced structures and buildings allowances and relief from secondary Class 1 National Insurance Contributions (NICs) for qualifying employers on the earnings of eligible employees up to £25,000 per annum. 

Venture Capital Schemes

The Government is increasing the generosity and availability of the Seed Enterprise Investment Scheme for start-up companies. The amount of investment that companies will be able to raise under the scheme will increase from £150,000 to £250,000. The gross asset limit will be increased from £200,000 to £350,000 and the investment must be made within 3 years (increased from 2 years) of trade commencing. In a bid to support these changes, the annual investor limit will be doubled to £200,000. The changes take effect from 6th April 2023.

Simplifying the tax system

Changes to simplify the tax system of the UK were underlined by a number of changes to positively impact the lives of small business owners. They are:

  • Changes to the Enterprise Management Incentives (EMI) scheme from April 2023 to simplify the process to grant options and reduce the administrative burden on participating companies. This includes, from 6 April 2023, removing requirements to sign a working time declaration and setting out details of share restrictions in option agreements.
  • Delivery of IT systems to enable tax agents to payroll benefits in kind on behalf of their clients – allowing agents to better support their clients and reducing burdens on employers.
  • The government will extend the Help to Save scheme by 18-months, on its current terms, until April 2025. A consultation will also be launched on longer terms options for the scheme.
  • Measures to simplify the customs import and export processes, including improvements to the Simplified Customs Declaration Process, and the Modernising Authorisations project.

National minimum wage rates change April 2023

From 1 April 2023, the following increases to NMW/NLW will come into force:

National living wageRate from April 2023Rate from April 2022Increase %
23 years old plus£10.42£9.509.7
21-22 year old rate£10.18£9.1810.9
18-20 year old rate£7.49£6.839.7
16-17 year old rate£5.28£4.819.7
Apprentice rate£5.28£4.819.7

The increases apply in the next ‘pay reference period’ after the increase. For example, if X gets paid on the 15th of the month, the old rate applies until the 15th, and the new one from the 16th. To avoid misunderstandings, you might want to explain this to your staff.

Falling foul of the law

The consequences of failing to pay NMW/NLW can be costly:

  • fines at 200% of arrears (reduced to 100% if paid within 14 days, subject to a maximum of £20,000 per unpaid worker);
  • repayment of arrears, calculated at the current rate of NMW/NLW;
  • criminal proceedings for the most serious breaches.

Common mistakes

Keeping up with entitlement

16% of those publicly ‘named and shamed’ by the government for breaching the NMW/NLW blamed failing to increase pay in line with entitlement. You should therefore be careful to keep on top of employee birthdays.

If you employ apprentices, that rate is only paid in the first year; thereafter, only to those under 19. Your should be aware of when they:

  • move into year two (if 19 and over);
  • turn 19 (after year one); and
  • finish their apprenticeship.

These events mean they must be paid the appropriate NMW/NLW rate from the next ‘pay period’.

The Import One Stop Shop (IOSS)

As of 1 July 2021, there are changes to the way VAT is handled for online sales from businesses worldwide to consumers (that is, B2C) in the European Union (EU).

The goal is to make life much easier for those eCommerce businesses selling to consumers across the EU’s national borders, and thereby facilitating trade.

The changes can be utilised by businesses outside of the EU, including the UK.

The changes are commonly referred to as the EU VAT E-commerce Package and the two key components are One Stop Shop (OSS) and Import One Stop Shop (IOSS).

Any business that has been using the Mini One-Stop-Shop (MOSS) for certain kinds of digital services will already know of the benefits of this kind of simplification.

The new measures extend MOSS by opening it up to more services and also goods including those imported into the EU, thereby potentially simplifying VAT for many more kinds of sales.

It should be noted from the start that neither OSS nor IOSS are mandatory.

As an alternative, businesses can register for and then both account for and pay VAT in each of the EU countries in which they sell to consumers.

This is administratively onerous, of course, and is one of the reasons why OSS and IOSS were created.

It should also be noted that these new VAT measures are limited to online sales to consumers in the EU.

Business to business (B2B) sales from a business in the UK to a business in an EU country continue as they have following the end of the Brexit transition period. on 1 January 2021, which is to say, B2B sales of services are generally subject to the reverse charge.

Exports of goods should be zero rated, and are then subject to tax in the destination country through the application of import VAT.

Government launches consultation on exit payments to farmers

The Government has (19 May) published a consultation on changes to the Basic Payment Scheme (BPS) to support farmers through the agricultural transition period from now until 2027 which will deliver a better, fairer farming system in England.

The consultation will be open for 12 weeks and focuses on two key areas:

Lump sum exit scheme – Building on evidence that some farmers would like to retire or leave the industry but have found it difficult to do so for financial reasons, the Government proposes to offer them a lump sum payment to help them do this in a planned and managed way. The consultation seeks views on who should be eligible for these lump sum payments and how the payments should be calculated.

Delinked payments – Direct Payments currently made through the Basic Payments Scheme offer poor value for money and are based on how much land a farmer has, which inflates rent and can stand in the way of new entrants. The Government plans to phase Direct Payments out over a gradual seven year transition period, to move to a fairer system. The consultation includes plans to separate the payment from the amount of land farmed, from 2024. This will simplify the process for farmers, allow them to focus on running their business and encourage them to take up the government’s new environmental land management schemes, which will reward sustainable food production and environmental improvements. The consultation seeks views on how the ‘delinked’ payments will be calculated.

A vibrant farming industry also needs to attract new talent and create more opportunities for new entrants and farmers wishing to expand their businesses. The Government is working together with industry leaders, local councils, land owners and new entrants to co-design a scheme to create real opportunities for new farming businesses. The new scheme will be available to support new entrants from 2022. Recommendations for the design of the scheme will be shared later in the year.

Environment Secretary George Eustice said:

We need to address the twin challenges of helping new entrants fulfil their dream and gain access to land, while also helping an older generation retire with dignity.

Our exit scheme will offer farmers who want to exit the industry all of the area payments they would likely have received until the end of the transition period in a single lump sum. It gives them a real incentive to confront what can often be a difficult decision and will help them clear bills and settle debts.

By renting out their farm or surrendering their tenancy, those exiting the industry will create important opportunities for the next generation of farmers and later this year we will be saying more about our plans to work with County Farm estates and other land owners to ensure that we nurture the right conditions for new enterprises to flourish.

This follows last year’s announcement of the Agricultural Transition Plan – the Government’s landmark plans to reward farmers and land managers for sustainable farming practices, which will see the introduction of a new, fairer system, co-designed with industry, that is tailored in the interests of English farmers.

The proposals within the consultation seek to offer a fairer system for farmers, encouraging generational change by providing more flexibility for new entrants to start up their farm businesses and supporting those who are ready to leave the sector to do so on their own terms.

The Government is taking steps to develop and co-design each element of the future system in partnership with industry. The consultation launched today seeks feedback on the proposed design of the lump sum exit scheme. At the same time, work is underway to design the New Entrant Scheme and just last month, farmers looking to continue farming were encouraged to take their first step towards a greener future by expressing their interest in participating in the national pilot of the Sustainable Farming Incentive. The application window for this has closed , with successful applicants expected to be invited to make a formal application to begin agreements starting in October shortly.

The proposals set out today also build on previous steps that have been taken to simplify the Basic Payment Scheme, including simplifying penalties for small overclaims of land from the 2020 scheme year, the removal of EU greening requirements which required farmers to carry out specific practices to qualify for additional payments but historically delivered little for the environment, and improving the arrangements for farmers with land in more than one part of the UK, from the 2021 scheme year.

The consultation will close for responses on 11 August 2021. A full report on the responses to the consultation will be published later in the year.

The New Mortgage Guarantee Scheme

The mortgage guarantee scheme that was announced March 2021 is intended as a temporary measure. It is open for new mortgage applications from April 2021 to December 2022, in line with the government’s view that the current scarcity of high loan-to-value lending is primarily a response to the pandemic rather than a symptom of a longer-term structural change in the mortgage market.

The government will review the continuing need for the scheme towards the planned end date and determine whether extending the period of eligibility for new mortgages would continue to deliver benefits for prospective homeowners.

The scheme is designed to help creditworthy households struggling to save for the higher mortgage deposits required by lenders in the current environment. For this reason, a mortgage eligible for a guarantee under the scheme will need to:

  • be a residential mortgage (not second homes) and not buy-to-let
  • be taken out by an individual or individuals rather than an incorporated company
  • be on a property in the UK with purchase value of £600,000 or less
  • have a loan-to-value of between 91 per cent and 95 per cent
  • be originated between the dates specified by the scheme
  • be a repayment mortgage and not interest-only and
  • meet standard requirements in terms of the assessment of the borrower’s ability to pay the mortgage, for example a loan-to-income and credit score test.

The scheme is also designed to ensure that lenders cannot use the government guarantee to restructure the riskiest part of their existing loan book, and that borrowers remain the beneficiaries of the intervention.

The scheme will help to ensure the mortgage market provides options for consumers with smaller deposits who also want a mortgage with the security of predictable repayments for a longer period. For this reason, it will be a requirement that any lender participating in the scheme must offer a five year fixed rate product as part of their range of mortgages offered under the guarantee.

Self-Employed Income Support Scheme SEISS – June 2021 Update

Self-Employed Income Support Scheme SEISS June 2021 Update – Fifth Grant

The fifth grant will cover the period May 2021 to September 2021 – guidance for claiming should be available for the end of June.

What’s different about the fifth grant?

The fifth grant will be determined by how much your turnover has been reduced in the year April 2020 to April 2021 – more information will follow.

March 2021 Update – Fourth Grant

The fourth grant will be available from Late April 2021 until 31st May 2021.  If you are eligible then HMRC will contact you in mid-April to give you your personal claim date.  There will be further guidance to follow.  There are some amendments to the basis for claiming and the income calculations, more HMRC information can be found here.

There is also an important change for those traders who started their business in the 2019/2020 tax year (these were previously excluded from the grant), however applying for the grant may not be straight forward for some of these traders, as HMRC are writing a group of these new traders (around 100,000 traders) asking for confirmation of identity and proof of trading.  If you receive such a request from HMRC and do not respond then you will be denied access to the grant – you will be required to complete a pre-verification check and you must complete all 7 steps to make a successful claim – these steps are as follows:

Step 1: Open the letter

Receive and read the HMRC letter which should arrive between 10 March and mid-April.  The list of genuine HMRC contacts has recently been updated to include reference to the SEISS letter to first time tax return filers, so this might provide some comfort to taxpayers that the HMRC letter should not be ignored.  

Step 2: Answer call from HMRC

Up to two weeks after the letter is sent an HMRC officer will call the contact number given on the taxpayer’s 2019/20 tax return. If the agent’s number was shown as the contact point HMRC will ask the agent to pass on their client’s telephone number.

The taxpayer needs to answer HMRC’s call although it will be shown as coming from an “unknown number”.

HMRC will make only three attempts to call between 8am and 5.30pm. If none of those three attempts are successful the taxpayer will have failed the pre-verification. It is therefore essential that HMRC has the taxpayer’s correct telephone number.

The taxpayer can correct the number held by HMRC by calling: 0800 024 1222. This number is only set up to update taxpayers’ telephone contact details; the call-handler can’t deal with further queries about the SEISS.

Step 3: Supply email address

When the taxpayer does speak to HMRC they must confirm or supply their email address. They must also agree to receive a link to a Dropbox account to that email address.  

Step 4: Find email from HMRC

The taxpayer must receive and open an email from HMRC that includes the Dropbox link. This is another point where the system could break down, as the HMRC email could easily be automatically sent to the taxpayer’s junk folder.  

Step 5: Digital copies

The taxpayer needs to make digital copies of a form of their ID (eg their photo-card driving licence, or current passport) plus three months of their UK business bank statements from 2019/20. This information is needed to demonstrate that the new business has been active in 2019/20.

If the business has been run without a UK bank account HMRC will accept other documents, but the taxpayer must agree what is acceptable in their call with HMRC.  

Step 6: Upload documents

Taxpayer has only two days to upload the digital copies of their ID and bank documents to the HMRC Dropbox. After two days the Dropbox link will expire and the taxpayer will fail the pre-verification. 

Step 7: Apply for the grant

The online portal to apply for the next SEISS grant will open in late April, HMRC hasn’t confirmed exactly when. All the above steps need to be completed before the taxpayer attempts to claim the SEISS grant. Tax agents cannot claim SEISS grants on behalf of their clients.  


There are some obvious concerns around this system, particularly in respect of those that may simply not have the facilities to comply, the timescales involved and of course the fact that this looks like a scam.  Without prior warning you may dismiss the initial call as a scam, loading documents into a Dropbox has a particularly suspicious feel to it and sadly it is highly like that scammers will copy this procedure to launch attacks.

As your agent we cannot make the claim on your behalf but we should be able to assist in confirming the validity of any request and to advise if such a request for information would be relevant to you.

Additional Information:

Recovery Loan Scheme – Launches 6th April 2021

6 April saw the launch of the Recovery Loan Scheme (RLS). Available until 31 December, subject to review, RLS provides a guarantee to lenders and covers a variety of products including term loans, overdrafts, asset finance and invoice finance, which companies of all sizes can access, regardless of their turnover. 

What’s more, businesses that have borrowed under CBILS, CLBILS or BBLS can also apply for RLS provided they meet eligibility criteria. To keep up to date on the opportunities available to your clients through RLS, simply create your free Swoop account. 

More information can be found here

COVID19: Coronavirus Business Loan Schemes Extended – January and March 2021 Update

March 2021 Update: Businesses that took out government-backed Bounce Back Loans will now have greater flexibility to repay their loans with the option to delay repayments by six months or to extend the length of the loan using Pay as You Grow repayment flexible options.

Coronavirus Business Interruption Loan Scheme

The scheme helps small and medium-sized businesses to access loans and other kinds of finance up to £5 million.

The government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months.

The scheme is open until 31 March 2021.

Coronavirus Bounce Back Loan

The scheme helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available is £50,000.

The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.

The scheme is open to applications until 31 March 2021.

If you already have a Bounce Back Loan but borrowed less than you were entitled to, you can top up your existing loan to your maximum amount. You must request the top-up by 31 March 2021.

Vat Domestic Reverse Charge

See the bottom of this article for details of a free Webinar hosted by Xero (you don’t need to use Xero to access this webinar)

What is the VAT reverse charge?

The government is changing the way that HMRC collects VAT payments.
Until now, businesses in the construction industry would usually charge VAT when selling their materials or services, regardless of whether they are dealing with clients, contractors, subcontractors, etc.

As of March 1st, 2021, suppliers will not be allowed to charge VAT unless they are supplying services to an “end-user”. For those transactions, they must only invoice for and collect the amount excluding VAT. Instead of paying the VAT to the supplier, the customer will pay the VAT directly to HMRC.

Who is classed as an “end-user”?

Final customers are referred to as “end users” in the guidelines. Anyone who will either use, rent or sell the structure in question is an end-user, so for example:

  • Landlords
  • Developers
  • Domestic householders
  • Local authorities
  • Utility companies

Of course, this is made a little more complicated by the fact that “intermediary suppliers” are also treated as end-users, so if you deal with those, you can continue to charge them VAT too.
Your customer should confirm in writing that they are an end-user. (See Example End User Statement)

HMRC’s technical guide offers some further clarification on this distinction and what you should do to determine how your customers should be classified.

Download Flow Chart PDF

1. Read the government’s official advice.

We highly recommend scanning through the guidance published by HM Revenue & Customs for a better understanding. There are a lot of pointers there which are specific to different situations.

2. Talk to CGA

You will also be able to get more personalised advice CGA.   We can help you understand what the biggest impact will be on your business, given the way you work and what steps you should take.   

3. Consider how you handle your VAT returns.

It is common for contractors to do their VAT returns on a quarterly basis. If that is what you do, consider changing to monthly. Although it might require more admin in the short term, this may help balance out the effect on your cash flow.

4. Update your invoicing system.

You will need to review your invoices and potentially remove VAT from a lot of them moving forward. Make sure this is as systemised and automated as possible!

Invoices sent after 1 March 2021 will need to contain wording explaining that they are reverse charge invoices and will look something like our example.

They will not show VAT in the columns which calculate the payment to be made. On the following page there is an example invoice where no end-user certificate has been supplied.

See the example invoice.

The example invoice is not prescriptive – legally you do not have to show the VAT number of the customer, but it evidences that you have checked that they are registered and is good practice.

Your software system may not let you calculate the VAT that is being reverse charged and print it outside the accounting column. If you cannot show it, don’t worry. The recipient of the invoice will have to do the calculation themselves.

Use your software system to record as much information about your customer/supplier as possible.

What is important is that your invoice does not charge VAT and clearly shows that it is a reverse charge invoice and S55A applies.

5. Write to your subcontractors.

When your subcontractors invoice you for their services, they can no longer charge you VAT under the new rules, because you will owe it to HMRC directly instead. We suggest writing to them to confirm this, advise them on where to go for more information, and maybe offer to discuss further if needed. (See example letter to sub-contractors)

6. Write to your Customers (Intermediaries and End Users) – You need to establish if your customer is an intermediary or end user – they may be both.

See example letter to customers.

In deciding whether you are working for an end user you must ask yourself who you are actually contracted with, who are you expecting to pay you. Do not think about the final client if you will not be directly contracted to or paid by the final client. Ask yourself, is the firm that you work for going to be the end user of that building or construction activity?

Sometimes you will contract with a group company that is acting for another company in its own group as a property procurement company, it is an intermediary for the end user.
Sometimes you will work for a landlord who is acting for a group of tenants to procure and organise work.

The tenants are the end users and the landlord is an intermediary.

If a business is acting as an intermediary and is VAT registered and CIS registered and the work you are doing is standard rated construction work, you must reverse charge VAT unless the intermediary gives you an end user statement.

Intermediaries acting for groups or for tenants are allowed to issue end user statements. If they give an end user statement there is no need to question it or to enquire about the structure of the group companies, or the landlord tenant contract in any detail – if you hold an end user statement you must charge VAT.

FREE Webinar – Managing Reverse Charge VAT and CIS

Next week, on 26th February at 10am Xero are running a free webinar for construction businesses, outlining the Reverse Charge VAT changes and giving tips on how to prepare. This session is open to all construction businesses, regardless of whether they currently use Xero. 

We welcome you to join by clicking this registration link 

The 45 minute webinar will cover:

  • What Domestic Reverse Charge VAT is 
  • How it will affect both contractors and subcontractors
  • How to prepare for the mandatory change 
  • How Xero can help manage Domestic Reverse Charge VAT and CIS